FAIR Act Ties Utility Rate Approval to Banning DEI and ESG Practices

The newly introduced Fair, Affordable and Inclusive Rates Act, or the FAIR Act, is about to drop a massive regulatory bomb on how local electric utilities operate and how state regulators approve your power bill. This bill uses the ultimate leverage—the ability to approve rates—to force utilities to abandon specific practices related to Diversity, Equity, and Inclusion (DEI) and Environmental, Social, and Governance (ESG) factors.

The Fine Print: What Kills a Rate Hike?

Section 2 of the FAIR Act makes it crystal clear: State utility regulators absolutely cannot approve a rate for a local electric utility if that utility is doing certain things. Think of it as a policy tripwire. If a utility crosses it, the state regulator’s hands are tied, and they can’t sign off on the utility’s proposed rates. This means utilities would have to choose between their current DEI/ESG policies and getting their rates approved, which is how they keep the lights on and pay their bills.

For DEI, the ban targets practices that discriminate based on characteristics like race or biological sex. More specifically, it bans rate approval if the utility requires employees to undergo training or sign documents asserting that any specific group is “inherently superior, inferior, oppressive, or privileged.” If your utility currently runs mandatory training that touches on these concepts, they would likely have to stop or risk their rates being rejected. This provision is designed to halt specific types of mandatory ideological training in the workplace.

The ESG Firewall: Reliability Only

The bill also sets up a major firewall against utilities considering ESG factors when setting rates or making decisions that affect those rates. If your electric company considers environmental goals (like reducing carbon emissions) or social goals (like setting workforce diversity quotas) in its general business planning, the state regulator can’t approve their rates. The bill defines “ESG factors” narrowly, excluding them unless they are directly tied to financial issues like lowering costs or improving service reliability, or if the utility is simply following a specific, existing federal or state law.

This is a big deal for utilities trying to modernize the grid or invest in climate resilience. For example, if a utility wants to invest in a new, expensive transmission line to withstand extreme weather (an ESG-related goal), they must prove that this decision is solely about cost and reliability, not about broader environmental stewardship. If they can’t, the state regulator can’t approve the rate needed to pay for that investment. This creates a powerful incentive for utilities to only focus on the bare minimum required by law, potentially sidelining voluntary efforts to transition to cleaner energy or improve community relations.

Who Gets Hit by the Policy Change?

This bill introduces a huge layer of uncertainty. First, it hits employees. If you’re a utility worker, the mandated training and internal policies you might currently rely on for anti-discrimination protection could be scrapped to keep the rate approval process moving. Second, it impacts small businesses. The FAIR Act explicitly targets supplier diversity programs—those initiatives that give preference to minority-owned or women-owned businesses—unless those programs are strictly mandated by existing law. If your small business relies on contracts through a utility’s voluntary diversity program, that work could dry up.

Finally, it affects state regulators. This bill essentially tells state public utility commissions (PUCs) that they lose their authority to approve rates if the utility engages in certain corporate policies, severely restricting their ability to regulate based on local needs or broader public interest goals. This federal-level intrusion into state rate-setting is a significant shift, forcing state regulators to become internal policy enforcers for the utility’s DEI and ESG practices, rather than just economic watchdogs.